ERA examines corporate control arguments and serious penalty allegations made
The Employment Relations Authority (ERA) recently dealt with a case involving a worker's claim for unjustified dismissal for redundancy and his application to join a parent company as a second respondent.
The matter concerned a worker who claimed his dismissal from his employer was unjustified and sought to bring penalty claims against the parent company.
The worker argued that the parent company, which was a shareholder of his employer, should be joined to the proceedings because it had complete control over which wholly-owned subsidiary he worked for and switched him between entities at will.
The case highlights the circumstances under which parent companies can be joined to employment proceedings and the threshold for dismissing claims as frivolous or vexatious.
The worker submitted that the parent company should be joined to the proceedings on several grounds.
He argued that the absence of an employment relationship between himself and the parent company, and the fact that the companies were separate legal entities, were not relevant to determining whether the parent company should be included in his case.
The worker contended that if an order was made against his employer and enforcement action was later needed against the parent company, then the parent company would be directly affected by any decision.
He also pointed to his updated claim which sought penalties against the parent company under employment legislation.
The worker provided information indicating that around the time of his dismissal, the parent company took control of and sold machinery that was imported under a licence held by his employer.
He argued that the parent company's actions, including seeking to remove his employer from the companies register, may have left him with no company to pursue his claims against.
The worker disputed factual information provided by the parent company's management, including matters about access to and ability to sell imported machinery, who held the relevant licence, and whether products could be sold without the licence.
These disputes suggested deeper questions about which company actually controlled the business operations.
The parent company argued that the ERA had no authority to hear claims against it and should not be joined to the worker's case for several reasons.
It stated that this issue had previously been dealt with by the Authority and that the companies were separate legal entities with no employment relationship existing between the parent company and the worker.
The parent company maintained that no proper claim was made against it, including any allegation that the parties were in an employment relationship or that it was a controlling entity over the worker's employment.
It also argued that no specific remedy was sought against it or that the penalty claim was a separate matter entirely.
The worker's direct employer supported the parent company's position in opposing the joinder application.
Both companies emphasised the legal separation between the entities and argued that there was no basis for including the parent company in employment proceedings where no direct employment relationship existed.
The companies' arguments focused on jurisdictional issues and the principle that separate legal entities should be treated as distinct for employment purposes, even when one company owns shares in another.
The ERA explained that it has broad powers to join additional parties to employment cases either on its own initiative or when someone applies to include them.
The purpose of this power is "to more effectively dispose of any matter before it according to the substantial merits and equities of the case."
The ERA noted established legal principles that generally, workers can choose who they want to pursue claims against.
However, strong grounds exist for joining additional parties if they would be directly affected by the worker's claim and the claim may impact their rights or interests.
The ERA also considered compliance enforcement provisions, which give the Authority broad discretion to order compliance with its decisions.
These enforcement orders can be made against people who were not original parties to the case, for the purpose of ensuring earlier decisions are followed.
The ERA noted that when an incorporated employer fails to pay compensation to an employee, the Authority may order company directors to use their position of control to ensure the company meets its obligations to the worker.
The ERA determined that the parent company's interests were directly engaged by the claim made against it in the worker's updated statement of problem.
The ERA stated that "the claim is a serious one and [the parent company] should have the ability to respond fully. To require the matter to be separately lodged would likely invite further procedural complexity."
The ERA ordered that the parent company be joined to the proceedings, allowing it to respond fully to the serious allegations made against it. This decision recognised that requiring separate proceedings would create unnecessary procedural complications and potentially duplicate efforts.
However, the ERA noted that the proceedings were not yet at the stage where consideration of enforcement orders was appropriate, indicating that such matters would be addressed later in the process if the worker succeeded in his underlying claims.
The ERA demonstrated that parent companies cannot automatically avoid involvement in employment disputes simply by maintaining separate legal structures when serious allegations are made about their control over employment decisions.
The ERA ordered both companies to file their formal responses, with investigation meetings scheduled for August 2025.
The decision allows the worker's case to proceed against both his direct employer and the parent company, ensuring all relevant parties can be held accountable for any proven breaches of employment obligations.
